Three of the Best Ways to Hedge for More Volatility

11:11 03/09/2019

Markets are in meltdown mode thanks to a storm of bad news.


The latest Labor Department report that showed an addition of 20,000 jobs in February, which was well below expectations for 180,000.  The U.S. and China trade war may not be coming to an end after all.  And there are signs of further weakness around the globe.


In fact, the European Central Bank reduced its estimates for economic expansion in the eurozone and injected more stimulus, according to USA Today. China's exports dropped by 20.7% in February, far more than the estimated 4.8-percent decline.


On top of all that, technical indicators aren’t looking so hot.


For one, by failing to break above that resistance, panic is returning.


Two, RSI became stretched to its 70-line, overbought.  That was confirmed with an over-extension on MACD and Williams’ %R,  which jumped above its 20-line.  


We could also clearly see the index was challenging its upper Bollinger Band (2,20).


Up to 80% of the time when these indicators align in overbought or oversold territory, we typically see a pivot in the other direction.  

At the same time, the fear gauge, or the Volatility Index (VIX) is beginning to break higher from oversold conditions as well.  Further tension in the markets could send it back to 22, near-term.


Should that happen, you want to prep your portfolio.  


We can do that with three different volatility-based trades:


  • iPath S&P 500 VIX Short-Term Futures VXX 

  • ProShares Ultra VIX Short-Term Futures UVXY 

  • VelocityShares Daily 2x VIX Short-Term ETN TVIX 

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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